Benefits of a Long-term Investment
Renting a home or apartment can be a great short-term solution for those who are not yet ready or able to commit to buying a home. However, when it comes to the long term, renting is not a good option for several reasons. We will explore why renting is not good long-term and back up our claims with sources.
One of the biggest drawbacks of renting is the lack of control and stability it provides. Renters are at the mercy of their landlords, who can raise the rent, sell the property, or choose not to renew the lease at any time. This lack of control can lead to a constant feeling of uncertainty and stress, which can have negative impact on mental health and overall well-being. According to a study by the Pew Research Center, renters are more likely to move frequently than homeowners, with 43% of renters moving in the past five years compared to 21% of homeowners. This frequent moving can disrupt one’s social and professional life, as well as create additional expenses and logistical challenges.
Another significant disadvantage of renting is the lack of return on investment. Renters pay monthly rent, which goes toward the landlord’s mortgage, property taxes, and maintenance costs, but does not contribute to their own equity or net worth. In contrast, homeowners build equity over time as they pay off their mortgage, which can be used as a source of wealth-building and financial security. According to the report by the Federal Reserve, the median net worth of homeowners in 2019 was $255,000 compared to just $6,300 for renters. This significant wealth gap highlights the long-term financial benefits of owning a home versus renting.
Renting can be cheaper than buying a home in the short term, as renters do not have to pay for property taxes, maintenance costs, or down payment. However, over the long term, renting can be more expensive than owning a home. According to a report by Zillow, in 2020, the median monthly rent in the United States was $1,734, compared to a median monthly mortgage payment of $1,595 for a typical home. This means that over time, renters will pay more in rent than homeowners will pay in mortgage payments, without building any equity in the process.
Finally, renting can be limiting when it comes to customization and personalization. Renters are often restricted in what they can do to their living space, such as painting the walls, adding new fixtures or appliances, or even hanging pictures or shelves. This can make it challenging to create a space that truly feels like home and can lead to a sense of detachment or transience.
In conclusion, while renting may be a viable short-term solution for some, it is not a good long-term option due to its lack of control and stability, lack of return on investment, long-term cost, and limited customization and personalization. Instead, homeownership offers a range of benefits, including financial stability, long-term wealth building, and the ability to create a space that truly feels like home.
Cilluffo, A., Geiger, A.W. and Fry, R. (2020) More U.S. households are renting than at any point in 50 years, Pew Research Center. Pew Research Center. Available at: https://www.pewresearch.org/ (Accessed: April 4, 2023).
Federal Reserve – “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances” (https://www.federalreserve.gov/publications/files/scf20.pdf)
Zillow – “Is It Cheaper to Rent or Buy?” https://www.zillow.com/research/rent-vs-buy-breakeven-horizon-2395/
Holzhauer, B. (2023) Here’s the average net worth of homeowners and renters, CNBC. CNBC. Available at: https://www.cnbc.com/select/average-net-worth-homeowners-renters/ (Accessed: April 4, 2023).
Minnesota Homebuyer’s connection (2022) Minnesota Homebuyer’s Connection. Available at: https://mnhomebuyersconnection.com/ (Accessed: March 24, 2023).